Mumbai leads with 1,050 bn modern retail potential with NCR next at 779 bn: Knight Frank & RAI Report

NEW DELHI: Knight Frank India today launched the second edition of its flagship report on the retail sector – ‘Think India. Think Retail. 2016’.Brought out in association with Retailers Association of India (RAI), itlooks into the emerging trends in multi-channel retailing, shopping centers and new formats. As part of the city-level analysis, the report identifies zone level supply-demand gap for apparel, F&B, Entertainment andGroceryacross India’s top three cities of Mumbai Metropolitan Region (MMR), National Capital Region (NCR) and Bengaluru, with a recommendation on the way forward. The report also contains case studies on successful malls across these the three metros.

Key Highlights:

•         Evolving consumer spending patterns and increasing disposable income levels are redefining the country’s retail landscape

•         E-tailing is opening doors for modern retail in Tier-II and Tier-III cities, where the brick & mortar format has limited visibility

•         Resizing of stores observed in malls - Reduction in anchor store sizes by more than 30%

•         Entertainment and F&B are the new anchors, which will fuel retail boom going ahead

•         The omnichannel model, which focuses on the customer, proving essential for the growth of modern retail

•         Modern retail penetration in India is extremely low at 19 % compared to US, Singapore and China which are at 84 %, 71 %  & 63 % respectively

•         69 % of the total retail spending comes from MMR, NCR & Bengaluru out of the top 7 cities

City Specific Takeaways:

MMR:

•         At INR 1,050 bn, the MMR has the highest potential for modern retail in the country. The region offers big opportunities for retailers across all four product categories – apparel, F&B, entertainment and daily needs

•         The retail expenditure of the MMR, at INR 1,214 bn, showcases the region’s potential for modern retail in the coming years

•         Modern retail penetration is set to increase from the current 13.5% to 50% by 2036

•         While  the market potential of F&B category  is INR 70 bn, daily needs supermarkets/hypermarkets) is pegged at a steep INR 588 bn

•         Island City has the highest potential for modern retail penetration in the apparel category

•         Andheri-Borivali zone has the highest annual modern retail potential of INR 178 bn

NCR:

•         NCR has the largest customer base for retail across all seven urban centres, making it an ideal catchment for retail

•         NCR hasINR779 bn potential for modern retail, making it second only to Mumbai, which has a potential of INR1,050 bn.

•         NCR surpasses Mumbai and Bengaluru in the total modern retail expenditure that stand at ‘INR 269bn

•         Modern retail penetration in NCR is set to increase from the current 26% to 50% by 2028.

•         While market potential in the modern retail for spending on apparel  is pegged at INR19 bn, in the F&B category, it is INR35 bn,  while the annual potential for daily needs (supermarkets/hypermarkets) is pegged at a steep INR512 bn

•         Modern retail formats in Central Delhi, South Delhi, Gurgaon and Noida are generating more business than the other zones of NCR in the Apparel and F&B categories. They not only attract their own catchment but also benefit from expenditure from other zone

Bengaluru:

•         Bengaluru has a potential for  INR486 bn of modern retail, which augurs well for the growth of modern retail

•         Bengaluru has the highest per capita annual modern retail expenditure, at INR16,191, across all seven urban centres, making it an ideal catchment for retail

•         Modern retail penetration is set to increase from the current 24% to 50% by 2026

•         The annual modern retail potential for daily needs (supermarkets/hypermarkets)in the city is estimated to be INR 243 bn, the highest among all product categories.

•         West Bengaluru holds the highest annual modern retail potential compared to other zones in Bengaluru.

Kumar Rajagopalan, CEO, Retailers Association of India, says, “India has always been a marketer’s sweet dream as well as a nightmare. Diverse population, multiple cities, young and vibrant city dwellers have created the market as well as complicated it. Modern-day India has multiple channels to fulfil consumer demands, coupled with an array of new and improved products. The RAI – Knight Frank ‘Think India. Think Retail’ Report is an attempt to demystify the demand and supply for retail property, products and channels across the key cities in the country. The numbers are astounding and no retail brand can afford to ignore the market potential.”

Dr. Samantak Das, Chief Economist & Director of Research, Knight Frank India says,

“The Indian retail sector has been undergoing structural changes for the last two decades. The most important and discernible waves towards the modernization of this sector include the onset of shopping malls with specialty retailers, e-tailing and the transformation of traditional shops into modern formats in shopping streets. Today, the modern retail penetration is estimated to be 19% in the top seven urban centres of India. Even though the pace of modernisation of retail formats in the country is slow, Bengaluru and NCR are likely to experience 50% modern retail penetration by 2026 and 2028, respectively. The modern retail segment in NCR, MMR and Bengaluru has a potential of more than INR 1,300 bn in the daily needs (hypermarkets/supermarkets) category. Apparel and F&B together have a potential of more than INR 300 bn. In order to support the potential of these two categories (apparel and F&B), the three cities together would require approximately 20 mnsq.ft of modern retail space. We believe this can be achieved in the long term through revival of non-performing shopping centres, transformation and addition of new space.  This huge potential can be explored by the retail sector, provided a befitting policy framework for the modernisation of the sector is implemented by the relevant authorities”.

Commented Aditya Sachdeva, Director – Retail, Knight Frank India: “

“The revival of non-performing shopping centres across the country and evolution of traditional shopping street to a modern retail format is very important to make the overall retail business conducive to cater to the potential demands of the retail sector.  Modernisation of shopping streets will enhance the customer shopping experience and subsequently attract the organised brands to have their presence. While there is great potential for overall growth in the brick and mortar retailing methods, proper infrastructure and implementation of FDI retail policies and state-level policies is a must. This in turn, will also help in retaining the interest of developers to invest in these formats since this is the most expensive form of asset development. For example, the planning of REZs (Retail Entertainment Zones) with direct access to mass public transport systems in Maharashtra is an important development to boost the growth of this sector.”

Link to the report:

http://content.knightfrank.com/research/317/documents/en/think-india-think-retail-2016-3500.pdf